Pulse.com.gh logo

Research: Poverty in Africa can be reduced by international remittances

A new study has shown that poverty and inequality in Sub-Saharan Africa can be reduced by international remittances.

  • Published:

The research, conducted by Eric Akobeng, PhD candidate from Ghana, West Africa and Graduate Teaching Assistant in the University of Leicester Department of Economics, discussed the extent to which money sent home by Sub-Saharan Africa migrants working abroad (international remittances) could reduce poverty and inequality by bridging the gap between the rich and the poor.

Eric Akobeng, who has worked as a development policy worker at the Ghana Ministry of Finance and Economic Planning for 13 years, said: “Remittance payments are great ways of sharing wealth between Sub-Saharan Africa countries and other nations. Sending money home from abroad is a hidden force for breaking the cycle of poverty and inequality in Sub-Saharan Africa.”

The results suggest that a 10% increase in remittances as share of gross domestic product (GDP) will lead to a 1.2% decline in the number of people living on less than US$1.25 per day, 2.4% decline in the depth of poverty, 3.1% decline in the number of people living in extreme poverty and 1.5% decline in inequality.

Published in The Quarterly Review of Economics and Finance, the study also investigated the extent to which an efficient financial system can boost the effectiveness of these remittances.

In particular, it was shown that a 10% improvement in the link between remittances and finance can lead to a 0.6% decline in the number of people living on less than US$1.25 per day, 1.1% decline in the depth of poverty, 1.4% decline in the number of people living in extreme poverty and 0.5% decline in inequality.

Eric added: “If remittances are received through banks or other financial intermediaries, there is a high probability that some part of the remittances income will be saved. An efficient financial system will provide the fertile grounds to facilitate the receipt and utilisation of remittances, leading to higher output and welfare improvement.”

Additionally this research demonstrated that remittance payments empower poor households and may be an important means of sharing prosperity between Sub-Saharan Africa and other countries in the future.

The dataset used for this study came from 41 Sub-Saharan Africa countries between 1981 and 2010.

When asked about future policy implications, Eric said: “In the future there is a need for Sub-Saharan African policy-makers not to depend solely on foreign aid and foreign direct investment but to look at remittance payment as a poverty-reducing and income-equalizing tool in designing poverty-reduction strategies.”

Eric Akobeng carried out the study under the supervision of Dr Barbara Roberts and Dr Jesse Matheson in the Department of Economics at the University of Leicester.

Dr Barbara Roberts, Eric’s primary supervisor, said: “Eric identified remittances as an important but often overlooked source of external finance for developing countries. He then quantified the impact of remittance flows on poverty reduction for Sub-Saharan Africa countries and articulated policy implications arising from his results. For his empirical investigation he chose Sub-Saharan Africa as the world’s poorest countries are located in this region.”

The research was funded by the Ghana Education Trust Fund and a Graduate Teaching Assistant Studentship from the University of Leicester.


Credit: NewsGhana

Do you ever witness news or have a story that should be featured on Pulse Ghana?
Submit your stories, pictures and videos to us now via WhatsApp: +233507713497, Social Media @pulseghana: #PulseEyewitness & DM or Email: eyewitness@pulse.com.gh.

Recommended Articles

Recommended Videos

Top Articles

1 Taxes In Ghana Don't rejoice; VAT has been hiked through ‘backdoor’ –...bullet
2 Investment banks in Ghana Top 5 investment banks in Ghana and why you...bullet
3 Menzgold Ghana Don't deposit money with Menzgold – BoG cautions...bullet
4 Kwabena Duffuor Official: Duffuor’s assets not being auctionedbullet
5 Education Top 5 private high schools in Ghana according to WAECbullet
6 Salaries In 2018 Here are the dates public workers will be...bullet
7 Uche Ofodile Captain Planet’s wife heads MTN Liberiabullet
8 2018 Budget Review Prepare to pay 35% tax if you earn 10k...bullet
9 Number 12 Panic withdrawals hit savings & loans company...bullet
10 Finance Meet the 5 richest, most successful self-made...bullet

Top Videos

1 New Discovery Ghana discovers new mineral, lithium in commercial quantitiesbullet
2 Plane Crash Starbow suspends operations following plane crashbullet
3 Forbes 2018 Africa's billionaires rich listbullet
4 Dr Joseph Siaw Agyepong Nobody can collapse my company – JOSPONGbullet
5 Money Alert Meet Africa's richest womanbullet
6 Support Finance minister buys Kantanka carbullet
7 Tech 6 reasons you should buy an iPhone SE instead of any of...bullet
8 Bozoma Saint John 10 quotes from Uber top official,...bullet
9 New Phones Nokia MWC 2018 Event in 5 minutesbullet
10 Video We are determined to move Ghana beyond aid - Bawumiabullet